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M&A Trends in Technology, Media and Telecommunications for Q1/Q2 2019 in Central and Eastern Europe

The European Commission announced this June to have cleared the acquisition of the ABC Data Group of Poland by the ALSO Holding AG of Switzerland. ABC Data is a Warsaw- based company active in six Eastern European countries, which generated sales of over 1.048 billion euro in 2018 as the leading Central And Eastern Europe Computer, Software and Consumer Electronics Distributor. Through the acquisition, ALSO is pushing ahead with its Eastern European expansion strategy, it said in a press release.

Morgan Stanley had estimated in their look at the trends for 2019, that the long-awaited consolidation of European companies was underway and likely pick up speed in 2019, enabled by a constructive political backdrop in various nations and by pent-up demand among corporates.

We are observing an increased collaboration between regulators to agree on effective joint approaches on large cross-border transactions.

The ABC data acquisition is important in the Central and Eastern European technology sector, however it comes in the middle of a trend of significant cross-border slowdown of Mergers and Acquisitions resulting from global trade tensions, with buyers preferring to seek acquisitions in their domestic markets instead.

Reuters recently reported that it had been more than 400 days since a cross-border deal worth over $20bn was announced.

In the MENA region, mergers and acquisitions have slowed down in 2019 with 44 deals reported in Q1 compared to 56 deals in the same period last year.

The most important deal in the technology sector was Uber’s acquisition of Careem’s mobility, delivery, and payments businesses across the greater Middle East region, ranging from Morocco to Pakistan, with major markets including Egypt, Jordan, Pakistan, Saudi Arabia, and the United Arab Emirates for $3.1 billion.

The governments in the MENA region continue to support a trend of strong international interest for cross-border deals by making increased continuous diplomatic efforts to attract international inflows and acquire interest in international strategic assets.

The region is already seeing the economic and social benefits of rapid technology adoption and is expected to see growing interest in this sector as businesses look to mergers and acquisitions to expand their digital footprint in the region and protect their existing services and market share from startups or new entrants.

Globally less than a quarter of the $2tn worth of deals struck in 2019 have been cross-border, the lowest level in more than two decades. Global mergers and acquisitions in Q2 of 2019 are down 13% and 27% from the first quarter of 2019 and the second quarter of 2018 respectively.

In the global technology sector the first quarter of 2019 saw a 5% decrease in the number of announced technology deals, but a 4% increase in total deal value over the prior quarter.

Digital and other telecommunications deals see a much lower rate of intervention compared with their share of global transactions than other sectors such as industrial and manufacturing, energy and natural resources, and transport and infrastructure.

The latest Ernst and Young Telecommunications Capital Confidence Barometer issued in April, after interviews with 2,900 senior executives in 47 countries, shows a positive outlook by executives underlining the critical role Mergers and Acquisitions are playing as companies globally realign their technology portfolios and human capital to pave the way. In the telecommunications sector, 55% of executives interviewed expected to actively pursue acquisitions in the next 12 months.

Confidence in technology and telecommunications remains high but it is yet to be determined whether this translates into an overall boost in mergers and acquisitions for Central and Eastern Europe and the MENA region.

In the coming days, we will address our forecast for the second half of 2019.

Severnaya Group Limited trades as Severnaya Investments across Europe, CIS and MENAT and is specialized in Cross-Border M&A and Corporate Finance for the Technology, Media and Telecommunications industries.

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*This article was originally published on LinkedIn on July 2nd, 2019

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